At least two big American life insurers already waive medical
exams for some prospective customers partly because marketing
data suggest that they have healthy lifestyles, says Tim Hill of
Milliman, a consultancy that advises insurers on data-mining
software systems.

The software picks up clues that are unavailable in medical
records. Recklessness in one part of someone’s life is a pretty
good signal of risk appetite in others, for example. A
prospective policyholder with numerous speeding tickets is more
likely than a safer driver to end up with a sports injury. The
software also detects obscure correlations. People who frequent
ATMs so they can make cash payments tend to live longer than
those who prefer writing cheques or paying with credit cards, it
turns out. People with long commutes tend to die younger. Why
this should be is not clear: some speculate that ATM users tend
to be more spontaneous types, who like to have cash in their
pocket and whose lifestyle may be more active; others hypothesise
that sedentary commutes mean less time to do something healthy in
the evening.

Interestingly, the advantage in using new sources of data to
underwrite appears to lie more in cost reduction and speed to
decision than accuracy:

But manual underwriting with medical tests can cost hundreds of
dollars and, according to one estimate, drags on for an average
of 42 days in America and Europe. That gives potential customers
ample time to talk to a competitor or walk away. Automated
underwriting can cost a tenth as much and be done once a human
reviews the software’s recommendation.

Much of this is still in the anecdotal and experimental stage,
but it is exciting to see that even big insurance companies can
embrace new ideas.